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Building a Battery Champion: What CATL and Dongqiao Reveal About China’s Industrial Model

China’s dominant role in electric vehicle batteries owes much to local government policy.

When Western policymakers discuss China’s dominance in electric vehicle batteries, the focus typically falls on Beijing: its industrial policy, state subsidies, and national strategic planning. Yet this emphasis obscures the role of local governments in cultivating industrial ecosystems and the symbiotic relationship between development zones and globally competitive firms.

Few cases illustrate this dynamic better than Ningde’s Dongqiao Economic and Technological Development Zone. Fujian’s local authorities helped create an attractive environment for CATL to establish and expand its operations in Ningde. As CATL grew into the world’s leading EV battery manufacturer, its presence in turn attracted suppliers, research institutions, skilled labor, and supporting industries to Dongqiao, transforming the zone into one of the world’s most significant battery clusters. 

This was not a one-way relationship: Dongqiao enabled CATL’s rise, while CATL elevated Dongqiao into a globally competitive manufacturing hub.

Understanding this relationship is essential for explaining CATL’s competitiveness. The company’s success cannot be reduced to subsidies alone. Rather, it reflects the advantages of industrial agglomeration, local state capacity, and sustained technological innovation. Research on industrial clusters has long shown that firms embedded in dense networks of suppliers, talent, and knowledge institutions gain productivity and innovation advantages that are difficult to replicate elsewhere. Ningde’s battery ecosystem suggests that China’s industrial strength may be rooted not only in national policy, but also in the local institutions and regional clusters that translate policy into competitive advantage.

The Local Roots of National Champions

China’s economic development zones (EDZs) have served as deliberate instruments for cultivating industrial champions at both the national and provincial level. Operating across multiple tiers of government, these zones offer preferential land, tax incentives, and streamlined approvals to attract and retain strategically targeted firms. 

The establishment of EDZs often generates significant positive effects on capital investment, employment, output, productivity, and wages, with gains driven primarily by new firm entry and the agglomeration economies that form as co-located businesses share suppliers, labor markets, and knowledge networks. Capital-intensive industries, such as battery manufacturing, benefit disproportionately. Additionally, EDZ designation tends to boost county-level patent activity by 15–25 percent, pointing to a direct link between zone status and technological upgrading.

Dongqiao illustrates these dynamics. CATL was founded in the zone in 2011, and Fujian’s provincial and local authorities actively expanded the surrounding supply chain by attracting investments in cathode and anode materials, separators, electrolytes, and intelligent manufacturing equipment. By the end of 2025, more than 90 upstream and downstream companies had clustered in Ningde, enabling vertically integrated production from raw materials through finished battery systems. 

CATL’s Dongqiao-based production bases alone reached 330 GWh of capacity, with a further 170 GWh under construction. Ningde’s lithium battery cluster has since been designated a national advanced manufacturing cluster, a recognition that reflects not just CATL’s scale, but the depth of the industrial ecosystem that Dongqiao helped seed.

From National Champion to Global Leader

Ningde entered the 2000s among the poorest cities on China’s southeastern coast. Like every poor Chinese city in the 2000s, Ningde officials were trying to hit investment attraction targets by leveraging whatever channels were available. In 2004, Ningde officials identified Zeng Yuqun, a Ningde native and ATL co-founder running one of the world’s largest consumer electronics battery businesses, as a recruitment target. Officials pursued him for four years before preferential land terms, tax incentives, labor recruitment assistance, and the completion of new rail and road links finally secured his commitment to invest........

© The Diplomat